- November 23, 2024
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Instead of a forensic audit, the Palm Coast City Council may pursue a city-wide risk assessment.
Council member Theresa Carli Pontieri suggested the risk assessment in lieu of a forensic audit after a presentation from the firm MSL CPAs & Advisors on what a forensic audit would entail at the council's Sept. 10 meeting. CPA Joel Knopp said that a forensic audit needs to have a narrowed scope of where there might be fraud and investigates to either prove or disprove fraud.
As an estimate, to do a forensic audit going back five years, it would cost city taxpayers around $50,000 per department, Knopp said, or close to $500,000 across the city. The scope of the analysis would change the price, he said.
“So we could be looking at a half a million dollars full nine yards, approximately,” Vice Mayor Ed Danko said. “I think it's important the public understands that it would be half a million dollars, plus, coming out of their tax dollars … Do they trust us that little, or not?”
Knopp said there’s a public and professional misconception of what the term “forensic” means. The public might use the term forensic to mean an investigation but professionally, he said, it’s used for a specific investigation.
I think it's important the public understands that it would be half a million dollars, plus, coming out of their tax dollars … Do they trust us that little, or not?”
— ED DANKO, Palm Coast vice mayor
“It’s a very narrow focus, like: here’s a very specific concern we have of fraud being committed somewhere and we want somebody to investigate that,” Knopp said. “What we see in the public is it's a term thrown out of, ‘We think money's being mismanaged by the city or county. We think there's abuse going on, but we don't know what it is.’”
Knopp said often that is because the public doesn’t have trust in the municipality’s elected officials. A forensic audit was first brought up in Palm Coast in 2023 over distrust in the city's management.
Pontieri said that while she doesn’t believe a forensic audit is necessary or that any funds were misappropriated, she said the entity-wide risk assessment would be a way to scratch the surface and find any areas within the city that are higher risk.
“I don’t think we can make any decisions about what is required or what is reasonable without doing that [the risk assessment] first,” she said.
A risk assessment would run the city around $45,000, depending on the firm the city bids with and the scope of the assessment, Knopp said. The report for that would not be very detailed, but it would identify the areas or departments in the city as either high- medium- or low-risk.
The ‘risk’ could be wrongdoing, he said, but it could also be a situation of employees feeling overwhelmed trying to keep up with the workload in a city that is growing as quickly as Palm Coast is.
“Maybe some departments feel understaffed, so there's a higher risk of something going wrong,” Knopp said. “It might not be intentional. It could be errors due to being overwhelmed.”
After receiving the risk assessment analysis, the council would decide what areas need further review, and in what ways, including potential forensic audits of specific departments or reviewing the departments for efficiencies. Knopp said the report typically includes what projects were recommended to address the identified risk areas.
If everything comes back as low risk, then I can't justify spending further tax dollars looking into it. But we have to start somewhere.”
— THERESA CARLI PONTIERI, city council member
“Let's scratch the surface and see if a risk assessment does say, ‘Hey, this is a high risk for you,’” Pontieri said. “If everything comes back as low risk, then I can't justify spending further tax dollars looking into it. But we have to start somewhere.”
Pontieri said she would like to use that assessment to try to identify areas in the city that could be improved for efficiency as well as identify the vulnerable areas.
Council member Nick Klufas remained skeptical of committing taxpayer funds to these assessments. He said a lot of the distrust is coming from “individuals on our council now,” and that could go away with the new council members’ inductions. He also suggested that staff be asked to perform an internal risk assessment, instead going to a third party.
But Danko pointed out that asking staff to conduct an internal assessment would not address the lack of public trust that started the demands for a forensic audit in the first place.
“It’s basically saying to the public, ‘let's have the fox guard the henhouse,’” Danko said. “And I think that's the perception we're fighting and we want to change.”
Before sending out for an official request for proposal from different firms, the council decided to wait to review an example of a risk assessment performed in another municipality from Knopp’s firm to get a better idea of what the assessment would entail.
